What are the different types of employment contracts, and which one should I use?
Employment contracts are agreements or written statements of terms between an employer and an employee which set out the terms and conditions that each party is expected to abide by. There are a number of different employment contracts that you are likely to come across as an employer, the main difference between employment contracts is usually the hours of work or term of employment. There are also different clauses depending on the level of the job role. First, you need to establish the ‘employment status’ as it affects their legal rights, what they are entitled to and what can be expected of them. The 3 main types of employment status under employment law are; Employee, Worker, and Self-Employed. The main difference between these is their legal rights and your obligations as an employer.
Harwood HR Solutions is a bespoke Human Resources company with years of experience in all matters of HR. As such, we are best placed to understand the complexities of employment contract terms.
In this article, we will take a look at four of the frequently used contracts, how they differ and which contract terms may be most suitable for your needs.
Permanent employment contracts
The first type of employment contract you need to know about is permanent employment. This type of contract applies to employees who work regular full or part-time hours (these hours can be varied) and are paid either an hourly rate or a set salary for their work.
Permanent employment contracts will stand until they are terminated by you the employer or your employee.
Permanent employee contract terms entitle employees to the full spectrum of statutory employment right; including paid holiday, maternity, paternity and adoption pay and leave, sick pay, shared parental leave and pay and parental bereavement leave and pay.
These contracts can usually be found by looking at job listings on various job boards and via internal recruitment within a company.
Temporary and Fixed-term employment contracts
Temporary employment contracts and fixed-term contracts are usually similar and used when a job opening is not expected to be permanent. They will usually have a set end date when employment will be terminated, although this date can be flexible. They are ideal for people who are travelling and looking for work while they are staying in a new country, or they are only able to commit for a short period of time for example students in a gap year; and for individuals who do not want to be tied down to a permanent role.
There are three main types of temporary employment contracts. These are:
- Fixed-term temporary positions to cover circumstances such as maternity leave or sabbaticals of a specific length e.g. 6-12 months.
- Temporary contracts for permanent positions in which an employee has been seconded for a short spell of three months.
- A temporary contract whereby an individual(s) is employed to specifically work on a particular project that is due to last a set amount of time
Industries which tend to use fixed-term or temporary contracts a lot include education, health and social care, factories and warehouses and public administration, amongst others.
Zero-hour work contracts are generally used when an employer wants a level of commitment from an employee, but they do not know how much work they will be able to offer or how often they will need the employee to work. A zero-hour contract can be offered to either a ‘worker’ or an ‘employee’ however, regardless of their status of employment, they are also entitled to paid holiday but instead is based on how much and how long they work for the employer.
Recruitment agencies are generally the best place to find zero-hour work in a wide range of sectors including farming and hospitality, which both commonly require seasonal work or certain times within the year to cover busier periods.
Contract for services
A contract for services is provided to someone who is self-employed or a worker, or an employee getting work through an agency. This contract is suitable for someone who is in a trade or a specialised field and can complete a project or piece of work that requires their specific expertise. This could include, for example, a self-employed builder, a freelance underwriter or an agency sub-contractor.
The written statement of terms for this contract would not include the same statutory employment rights as a permanent contract. However, there would still be protection for their health and safety on client premises and against discrimination.
Considerations before offering an employment contract
There are a number of things you should consider before offering an employment contract:
- Are you offering the legal statutory minimum (e.g. holiday entitlement, statutory sick pay, notice periods, maternity, paternity and adoption leave and pay etc)?
- Are you proving the contract before their first day of employment?
- Is it the right contract for the role you are filling?
- Do you want to offer other benefits or perks?
It is not a quick process if you want to change the terms of a contract once both parties have signed. Any changes after this point would need notice to be given and maybe a consultation. Therefore, it is important you get it right from the start.
As you can see, employee contracts are complex, and it is important you choose the right one at the right time if you want to ensure both parties have the right protections. This is something a good HR consultancy can help you with.
Employment contracts and types can be a difficult subject to get your head around. Luckily, the HR experts here at Harwood HR Solutions are here to help you navigate your employee contracts so that you always use the right contract for the right employment status. Get in touch with us today for a free consultation on 0203 936 9171.